R&D Tax Credit Boosts Growing Material Handling Industry

The demand for material handling and logistics industry has had a continued upward trend in today’s global world. The need for global supply chains and distribution of goods through advanced technology has employed over 700,000 in the material handling market, according to recent figures, and consumption greater than $156 billion in the U.S. In 2013, business logistics accounted for 8% of the U.S.’s GDP. This growth could accelerate with the Research and Development (R&D) Tax Credit. With recent legislative changes, the credit can now be claimed by more businesses and includes more eligible supply costs; a change that may increase a business’ claim by up to ten times.

What qualifies as “research and development” for credit eligibility? There are a number of qualifying activities, including developing material handling systems, designing robotic systems, manufacturing motor systems, or developing overhead material handling solutions, to name a few. The R&D Tax Credit is permanent and many states also have a similar credit which can be added to the federal claim.

Previously, small and medium businesses were often ineligible to claim the R&D tax credit due to the alternative minimum tax (AMT). At the start of the 2016 tax year, the AMT barrier was removed allowing all businesses to benefit from the incentive. Other regulatory and legislative changes have expanded the credit further, allowing companies to be rewarded for innovative solutions such as solving a technical problem on a factory floor or improving a distribution process.

Design improvements through automated systems and innovative technologies can pay off for companies who take advantage of the R&D tax credit. A material handling company which improved designs to an existing industrial system received $596,000 through federal and state R&D credits. These incentives help encourage companies to invest in automated solutions and advance the material handling industry.

If you think your company’s innovative solutions or designs could qualify for the R&D Tax Credit, contact a Swanson Reed Tax Advisor for a free assessment.


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